European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Regulatory Scrutiny: The CNMC has launched Phase II investigations into both Bondalti’s and Esseco’s takeover bids for Ercros due to competition concerns, potentially delaying or complicating the acquisition process.</li>
<li>Market Sentiment: With Ercros trading at €2.81, well below Esseco’s €3.745 bid, the gross spread of 33.3% and 20.5% deal probability indicate skepticism about the takeover’s success.</li>
<li>In 2024, Ercros reported €667.4 million in sales, €29.4 million EBITDA, and a €11.7 million net loss, reflecting economic headwinds that could influence shareholders' decisions on the competing takeover offers.</li>
</ul>


Regulatory Scrutiny: The CNMC has launched Phase II investigations into both Bondalti’s and Esseco’s takeover bids for Ercros due to competition concerns, potentially delaying or complicating the acquisition process.
Market Sentiment: With Ercros trading at €2.81, well below Esseco’s €3.745 bid, the gross spread of 33.3% and 20.5% deal probability indicate skepticism about the takeover’s success.
In 2024, Ercros reported €667.4 million in sales, €29.4 million EBITDA, and a €11.7 million net loss, reflecting economic headwinds that could influence shareholders' decisions on the competing takeover offers.


Ercros Takeover Battle: Regulatory Hurdles and Market Skepticism

<ul>
<li>The Spanish government has approved Esseco's bid for Ercros, after previously approving Bondalti's offer in June, signaling a significant step in the ongoing takeover battle for the chemical company.</li>
<li>The next step lies with the CNMV, Spain’s stock market regulator, which must first approve Bondalti’s bid before considering Esseco’s. However, both bids have opposition from shareholders holding 27%.</li>
<li>Ercros is trading in line with comparables, but there's potential for bidders to improve their offers, which is likely. Gross spread to Esseco's offer is 2%. Reiterate long.</li>
</ul>


The Spanish government has approved Esseco's bid for Ercros, after previously approving Bondalti's offer in June, signaling a significant step in the ongoing takeover battle for the chemical company.
The next step lies with the CNMV, Spain’s stock market regulator, which must first approve Bondalti’s bid before considering Esseco’s. However, both bids have opposition from shareholders holding 27%.
Ercros is trading in line with comparables, but there's potential for bidders to improve their offers, which is likely. Gross spread to Esseco's offer is 2%. Reiterate long.


Esseco/Ercros: Green Light from Government

<ul>
<li>Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals,  has made a competing all-cash offer at €3.84/share, cum dividend, valuing 100% of <a href="https://www.smartkarma.com/entities/ercros-sa" target="_blank" data-smartkarma-citation="entities:40951:1" rel="noopener">Ercros (ECR SM)</a>  at €351 million.</li>
<li>Putting 25e EBITDA of €70 million (source: IBES consensus), on the median of comparables, the stand-alone fair-value per share of Ercros is €4.4. Neither bid accounts for synergies. </li>
<li>The strategic fit of Ercros for both bidders and its intrinsic value suggest a likely bidding war, given the scarcity of listed companies similar to Ercros. Reiterate long.</li>
</ul>


Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals,  has made a competing all-cash offer at €3.84/share, cum dividend, valuing 100% of Ercros (ECR SM)  at €351 million.
Putting 25e EBITDA of €70 million (source: IBES consensus), on the median of comparables, the stand-alone fair-value per share of Ercros is €4.4. Neither bid accounts for synergies. 
The strategic fit of Ercros for both bidders and its intrinsic value suggest a likely bidding war, given the scarcity of listed companies similar to Ercros. Reiterate long.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>
<a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">7&amp;I (3382 JP)</a>'s MBO is off. Itochu has apparently not been able to agree with Ito-san on board composition/representation and management control. That the MBO is off isn't surprising.</li>
<li>
<a href="https://www.smartkarma.com/entities/yangzijiang-shipbuilding-holdings-limited" target="_blank" data-smartkarma-citation="entities:660:1" rel="noopener">Yangzijiang Shipbuilding (YZJSGD SP)</a> is sucking wind as United States Trade Representative’s (USTR) office proposed a raft of fees and other shipping restrictions on Chinese vessels</li>
<li>
<a href="https://www.smartkarma.com/entities/pentamaster-international-ltd" target="_blank" data-smartkarma-citation="entities:31099:1" rel="noopener">Pentamaster International (1665 HK)</a>'s Scheme comfortably gets up after a wild week of trading. </li>
</ul>



7&amp;I (3382 JP)'s MBO is off. Itochu has apparently not been able to agree with Ito-san on board composition/representation and management control. That the MBO is off isn't surprising.

Yangzijiang Shipbuilding (YZJSGD SP) is sucking wind as United States Trade Representative’s (USTR) office proposed a raft of fees and other shipping restrictions on Chinese vessels

Pentamaster International (1665 HK)'s Scheme comfortably gets up after a wild week of trading. 


Last Week in Event SPACE: Seven & I, Yangzijiang Shipbuilding, Pentamaster Int'l, T'Way Holdings

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ercros-sa" target="_blank" data-smartkarma-citation="entities:40951:1" rel="noopener">Ercros (ECR SM)</a> 's advisors will seek an improvement in Bondalti's €3.6/share offer, which comes amidst a sharp decline in EBITDA compared to 2022, and launched at the bottom of the cycle.</li>
<li>An improved offer price of €4.4/share, a 22% increase, would represent 6x EV/25e EBITDA, 11.3x 25e P/E, and thus could gain support from the Board.</li>
<li>Gross spread is 1.25%. Considering the potential for an improved offer price, I'd be long.</li>
</ul>



Ercros (ECR SM) 's advisors will seek an improvement in Bondalti's €3.6/share offer, which comes amidst a sharp decline in EBITDA compared to 2022, and launched at the bottom of the cycle.
An improved offer price of €4.4/share, a 22% increase, would represent 6x EV/25e EBITDA, 11.3x 25e P/E, and thus could gain support from the Board.
Gross spread is 1.25%. Considering the potential for an improved offer price, I'd be long.


Bondalti/Ercros: Board Will Seek a Sweetening

Spain

Ercros SA is an industrial company focused on the manufacture and sale of chemical and pharmaceutical products. It is listed on the Spanish Stock Exchange.  The company is divided  into three areas of activity: a business strategic unit, the intermediate chemicals division, and the pharmaceuticals division. Ecros serves clients worldwide.

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Ercros (ECR SM)

Ercros Takeover Battle: Regulatory Hurdles and Market Skepticism

CNMC launches Phase II investigations into Bondalti and Esseco's takeover bids for Ercros over competition concerns, casting doubt on acquisition...

Jesus Rodriguez Aguilar

Esseco/Ercros: Green Light from Government

The Spanish government has approved Esseco's bid for Ercros, after previously approving Bondalti's offer in June, signaling a significant step in...

Jesus Rodriguez Aguilar

Esseco/Ercros: Bidding War

Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals, has made a competing all-cash offer at €3.84/share, cum dividend, valuing...

Jesus Rodriguez Aguilar

Last Week in Event SPACE: Seven & I, Yangzijiang Shipbuilding, Pentamaster Int'l, T'Way Holdings

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Bondalti/Ercros: Board Will Seek a Sweetening

Ercros (ECR SM) 's advisors will seek an improvement in Bondalti's €3.6/share offer, which comes amidst a sharp decline in EBITDA compared to 2022,...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Ercros Takeover Battle: Regulatory Hurdles and Market Skepticism

​CNMC launches Phase II investigations into Bondalti and Esseco's takeover bids for Ercros over competition concerns, casting doubt on acquisition...

Jesus Rodriguez Aguilar

Esseco/Ercros: Green Light from Government

The Spanish government has approved Esseco's bid for Ercros, after previously approving Bondalti's offer in June, signaling a significant step in...

Jesus Rodriguez Aguilar

Esseco/Ercros: Bidding War

Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals, has made a competing all-cash offer at €3.84/share, cum dividend, valuing...

Jesus Rodriguez Aguilar

Last Week in Event SPACE: Seven & I, Yangzijiang Shipbuilding, Pentamaster Int'l, T'Way Holdings

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Bondalti/Ercros: Board Will Seek a Sweetening

Ercros (ECR SM) 's advisors will seek an improvement in Bondalti's €3.6/share offer, which comes amidst a sharp decline in EBITDA compared to 2022,...

Jesus Rodriguez Aguilar

CNMC launches Phase II investigations into Bondalti and Esseco's takeover bids for Ercros over competition concerns, casting doubt on acquisition...